AT&T to Acquire DirecTV for $48.5 Billion

DALLAS, TEXAS and EL SEGUNDO, CALIF. —AT&T and DirecTV have a agreed to a deal under which AT&T will acquire DirecTV in a stock-and-cash transaction for $95 per share based on AT&T’s Friday closing price. The agreement has been approved unanimously by the boards of both companies.

This purchase price implies a total equity value of $48.5 billion and a total transaction value of $67.1 billion, including DirecTV’s net debt.

The transaction enables the combined company to bundle video, high-speed broadband and mobile services through AT&T’s 2,300 retail stores and thousands of authorized dealers and agents of both companies nationwide.

Randall Stephenson, AT&T chairman and CEO, said the deal creates “immediate and long-term value for our shareholders. DirecTV is the best option for us because they have the premier brand in pay TV, the best content relationships, and a fast-growing Latin American business.”

DirecTV has the exclusive pay TV rights to NFL Sunday Ticket that provides every out-of-market game, every Sunday afternoon, on TV, laptops and mobile devices. DirecTV’s content ownership includes Root Sports Networks and minority stakes in the Game Show Network, MLB Network, NHL Network and the Sundance Channel.

DirecTV will continue to be headquartered in El Segundo after the deal closes.

With the benefits of the transaction, AT&T said it is able to commit to do the following, when the deal closes:

  • AT&T said it would use the merger to expand its plans to build and enhance high-speed broadband service to 15 million customer locations, mostly in rural areas where AT&T does not provide high-speed broadband service today, using a combination of technologies including fiber-to-the-premises and fixed wireless local loop capabilities. This new commitment, to be completed within four years after close, is on top of the fiber and Project VIP broadband expansion plans AT&T has already announced. Customers will be able to buy broadband service standalone or as part of a bundle with other AT&T services.
  • For customers who only want a broadband service and may choose to consume video through an over-the-top service like Netflix or Hulu, the combined company will offer standalone wireline broadband service at speeds of at least 6 Mbps (where feasible) in areas where AT&T offers wireline IP broadband service today at guaranteed prices for three years after closing. DirecTV’s TV service will continue to be available on a standalone basis at nationwide package prices that are the same for all customers, no matter where they live, for at least three years after closing.
  • Continued commitment for three years after closing to the FCC’s Open Internet protections established in 2010, irrespective of whether the FCC re-establishes such protections for other industry participants following the D.C. Circuit Court of Appeals vacating those rules.
  • The transaction does not alter AT&T’s plans to meaningfully participate in the FCC’s planned spectrum auctions later this year and in 2015. AT&T intends to bid at least $9 billion in connection with the 2015 incentive auction provided there is sufficient spectrum available in the auction to provide AT&T a viable path to at least a 2x10 MHz nationwide spectrum footprint.


DirecTV’s Latin American business is the leading pay TV provider in the region and has more than 18 million subscribers, including all Sky Mexico customers. AT&T said DirecTV’s satellite platform’s reach remains advantaged when compared with cable and telco in Latin America. Latin America has an underpenetrated pay TV market—about 40 percent of households subscribe to pay TV— and a growing middle class, and is DirecTV’s fastest growing customer segment.

DirecTV shareholders will receive $95 per share under the terms of the merger, comprised of $28.50 per share in cash and $66.50 per share in AT&T stock. The stock portion will be subject to a collar such that DirecTV shareholders will receive 1.905 AT&T shares if AT&T stock price is below $34.90 at closing and 1.724 AT&T shares if AT&T stock price is above $38.58 at closing. If AT&T stock price at closing is between $34.90 and $38.58, DirecTV shareholders will receive a number of shares between 1.724 and 1.905, equal to $66.50 in value. This transaction implies an adjusted enterprise value multiple of 7.7 times DirecTV’s 2014 estimated EBITDA. Post-transaction, DirecTV shareholders will own between 14.5 percent and 15.8 percent of AT&T shares on a fully-diluted basis based on the number of AT&T shares outstanding today.

AT&T intends to finance the cash portion of the transaction through a combination of cash on hand, sale of non-core assets, committed financing facilities and opportunistic debt market transactions.

To facilitate the regulatory approval process in Latin America, AT&T intends to divest its interest in América Móvil. This includes 73 million publicly listed L shares and all of its AA shares. AT&T’s designees to the América Móvil Board of Directors will tender their resignations immediately to avoid even the appearance of any conflict.

AT&T expects the deal to be accretive on a free cash flow per share and adjusted EPS basis within the first 12 months after closing.

The combination provides significant opportunities for operating efficiencies. AT&T expects cost synergies to exceed $1.6 billion on an annual run rate basis by year three after closing. The expected synergies are primarily driven by increased scale in video.

Along with DirecTV’s current strong cash flows, this transaction is expected to support future investment in growth opportunities and shareholder returns.

The combination diversifies AT&T’s revenue mix and provides numerous growth opportunities as it dramatically increases video revenues, accelerates broadband growth and significantly expands revenues from outside the United States. Given the structure of this transaction, which includes AT&T stock consideration as part of the deal and the monetization of non-core assets, AT&T expects to continue to maintain the strongest balance sheet in the industry following the transaction close.

AT&T’s 2014 guidance for the company remains largely unchanged. However, the company’s intention is to divest its interest in América Móvil, which will result in an approximately $0.05 reduction in EPS, as the América Móvil investment will no longer be accounted for under the equity method. Adjusted 2014 EPS growth is now expected to come in at the low-end of the company’s mid-single digit guidance.

The merger is subject to approval by DirecTV shareholders and review by the U.S. Federal Communications Commission, U.S. Department of Justice, a few U.S. states and some Latin American countries. The transaction is expected to close within approximately 12 months.

DirecTV is the premier pay TV provider in the United States and Latin America, with a high-quality customer base, the best selection of programming, the best technology for delivering and viewing high-quality video on any device and the best customer satisfaction among major U.S. cable and satellite TV providers. AT&T has a best-in-class nationwide mobile network and a high-speed broadband network that will cover 70 million customer locations with the broadband expansion enabled by this transaction.

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